Report Card: Research In Motion And Selected Peers

Research in Motion (RIMM) is an excellent example of a company that you don't want to own. It has good fundamentals, and yet the price continues to fall. The valuations are not strong but are better than the technicals.

Third-quarter revenue was lower than forecast as were earnings. RIMM expects continued pressure on both revenue and earnings in fiscal 2013 and likely beyond. Clearly, the Canadian company cannot compete with the likes of Apple, Inc. (NASDAQ:AAPL). I mention AAPL as an attempt to stress the importance of comparing valuations on all companies you may be holding or considering buying. There is the 'risk' and there is the 'reward'; comparing companies will help with the reward.

BlackBerry shipments for the quarter were down 21% to about 11 million units. A change in management obviously has been needed. The change has now been made in key areas. The new management is considering mergers and possible liquidation.

There remains the question of how the current users of RIMM hardware will be treated in the future?

Current Valuation for Research in Motion

Current Price:

$11.10

Comments: These are not strong Valuations and Target Price Projections. When I do further fundamental studies, the results neither improves nor declines. Projected earnings growth for RIMM indicates there will be a strong recovery through 2015. (I am skeptical!) My technicals are currently graded as, "very poor" as are my consensus opinions.

This suggests that RIMM will continue to be a company to watch but not to own.

Security's valuations should be updated and studied as frequently as possible. This work may or may not offer positive support or perhaps a negative warning! I do not recommend buying RIMM due to its current and yet unresolved problems.

Target Price:

Plus 10+% / minus 205+% from the current price.

Trailing P/E:

5.0

Forward P/E (fye 12/ date):

6.3

PEG Ratio:

0.86 (v. good)

Price to Sales:

0.32 (v. good)

Price to Book:

0.58 (v. good)

Return on Investment (R.O.I.)

19.9%

Valuation Divergence:

(minus) - 20+% from current the price.

Click to enlarge

Source of raw data: Finviz.

Projected Price is calculated and produces a probable range of the current price over the coming one to three months. Fundamental Valuation and Technical Opinion is calculated and translated into a Rating. See the below Report Card. I often suggest cash and patience as an alternative.

Report Card

Company Symbol

Fundamental - weighting (40%)

Technical - weighting (35%)

Consensus Opinion - weighting (25%)

Report Card -Grade: ( 0 - 100 / A - F )

RIMM

Very Poor

Very Poor

Very Poor

55 / F

AAPL

Excellent

Very Good

Excellent

89+ / B+

Click to enlarge

My weighted Fundamental, Technical and Consensus Opinion ratings range from Excellent to Very Poor. Grades below 90 / A are not current (never are) candidates for buying. Grades above 60 / F are not current (never are) candidates for short selling. Information and data are ever changing, so be alert. Every company's "Grade" can be from a neutral grade (60 to 90 / D to B) to a buy (greater than 90) or short sale (less than 60) in a very short time.

The technology sector and the computer micro and wireless equipment industry is and has been very strong since early 2009. This fact is applicable, both fundamentally and on the charts. Research in Motion is technically in sync with its fundamentals and is in stride with its industry. Normally, that would be a positive remark. Looking at the above tables and the chart below tells us a very different story. These graphics make crystal-clear that buying shares of one these companies has been very profitable and in the other a disaster. My criterion for taking a bullish position is that the company must have the prospect within its fundamental valuation and technical chart to outperform the general market, its sector, and industry group.

Market Status

The general market is currently fundamentally overvalued and technically overbought, and its consensus opinion is much too bullish. It is showing signs of serious deterioration, especially in the area of breadth. This means that you must consider holding cash or perhaps take bearish positions in the coming weeks.

My analytic focus is investing wisely, e.g. taking advantage of the bull / bear cycles as they occur within the overall marketplace. Integrating conservative fundamental analytics within these technical cycles means maintaining a process of the thorough and on-going analytics of many companies, sectors and industry groups.

I suggest that you take a long look at this 20-year chart. Having a longer-term perspective of a possible future investment will always give you a more consistent bottom line. Comparing the SPDR, S&P 500 ETF (NYSEARCA:SPY) tells a very compelling story about RIMM.

Professor's Opinion

Despite AAPL being the darling of Wall Street, I expect both companies to be under moderate pressure in the coming weeks and perhaps longer. For a resumption of an up-trend, we just may have to wait awhile.

There is an old saying in the world of education: A good professor can identify a very poor and failing student in less than a minute. It takes me about the same time to identify a very poor and failing company. RIMM is not a company on my future buy list.

The comparison of these two companies should make a strong statement of why I stress doing your homework well.

Conclusion

I am bearish on both the economy and the general market. My recent postings in Instablog are focused on securities that should not be held in your portfolio. It is important for you to understand that holding cash during questionable time frames is a wise choice. (This is definitely a "questionable" time frame.) This coming Saturday, I plan to include Research in Motion in my weekly Instablog posting.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.